Energy Institute Blog (UC Berkeley, Energy at Haas)

High Costs and Few Benefits From California’s Proposed Sustainable Aviation Fuel Tax Credit

California’s 2026 budget proposes a Sustainable Aviation Fuel (SAF) tax credit that lets diesel excise taxpayers offset liability by selling SAF. The credit, capped at $2 per gallon, could shave 10‑20 % or more from the state’s diesel tax base, potentially eroding $165 million to $1.2 billion in revenue. Modeling shows SAF output could climb to 1 billion gallons, but net carbon cuts are modest and cost $1,000‑$2,800 per ton. Consumers would feel the shift through 11‑14 c per gallon price hikes on gasoline and diesel.